The Claim of Unfair Dismissal - Essay Example

? Employment Law At the outset, the question of whether or not Tom would be en d to a claim of unfair dismissal would depend upon whether, under the terms of his employment contract, he would be classed as a self employed person, i.e, an independent contractor or as an employee of Unfit Ltd. Section 230(2) of the Employment Rights Act of 1996 states that a contract of employment “means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether it is oral or in writing.” Tom’s contract being in writing rather than oral appears to lend itself to an employment contract. As an employee, Tom would then be in a position where there is a general premise that he would be eligible to file a case for unfair dismissal, but when working as a self employed person, the employer’s liability would be limited. The basis for this lies in the rule laid down in the case of Jennings v Westwood Engineering, in which an employer is required to deduct taxes at the source from his employees; should be fail to do so, he could be committing a criminal offence. Since the employer deducts tax and insurance which are a percentage of his earnings, and to which the employer also makes a contribution, this means that the employer has certain obligations in respect to employees, so that the employees will have some rights in respect to sickness, unemployment or injuries arising during the period of employment. An employer however, has no such obligations towards a self employed person; as a result, any claim for unfair dismissal would not be sustainable if the worker is a self employed person. The original test used by the courts to arrive at a determination of whether or not an individual is an employee or not was the control test to determine how much control was exerted by the employer on the employee’s activities and this was refined by Denning LJ in the case of Stevenson, Jordan and Harrison Ltd v Macdonald and Evans (1952) as follows: ....”under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business but under a contract to services for his work, although done for the business, is not integrated into it but only accessory to it.” Due to the lack of clarity in these definitions, a number of factors were later identified in the case of ready Mixed Concrete (South East) Ltd v MPNI (1968), in which McKenna set out the following considerations in determining whether an individual was an employee or self employed: (a) Is the employee providing his skill in consideration of a wage (b) Is there an element of control exercised by the employer? (c) Are there provisions in the contract inconsistent with it being a contract of employment? Applying this in Tom’s case, it must be noted that at the outset, Tom has a guaranteed income, because he is entitled to 20 sessions with the company’s members, as stated under the first condition spelt out above in the case of McKenna. Secondly, it must also be noted that Tom does not supply his own equipment and tools; nor does he make arrangements to provide his own support staff to carry out an assignment as a contractor would do. In the case of Lee v Chung and Sun Chung Construction and Engineering Co Ltd, in determining whether an individual was an employee, the Court stated that when the worker used the tools and equipment provided by the company, he would fall under the category of an employee rather than self employed. Other factors examined in this same case were (a) how much financial risk the employee took and (b) how much investment responsibility he had and (c) how much s/he was able to profit from his own investment of time and effort. On this basis, it may be noted that Tom’s financial risk was not substantial because he had a guaranteed income from the Company’s members and could use the Company’s staff and equipment, which reduced his own investment liability. . In the case of Ready Mixed Concrete, McKenna also laid out the condition that a contract of provision of services or employment was to be examined in order to discover whether there were any terms contained within it that belied its claim to be a contract of employment. In Tom’s case, it must be noted that one of the clauses states that if he is unable to work, he has the power to delegate his services to another of the company’s personal trainers. In the case of Express Echo Publications v Tanton, the power of delegation of duties was seen to be detrimental to establishing a claim of employment; rather it clearly indicated that the worker possessed powers of delegation and authority which belie the claim to be an employee. The degree of delegation would also play an important role in deciding Tom’s status. The extent of control was also recently held to be the most important criterion to determine the nature of the employment contract, in the case of Dacas v Brook Street Bureau (2004). Can a worker delegate fully or is his power to delegate only a partial one? In the case of Macfarlane v Glasgow City Council, it was held that a limited level of powers to delegate was not inconsistent with a contract of employment. In Tom’s case, he cannot delegate freely of his own will to any one he deems suitable; rather, he is required to use one of the Company’s personal trainers and is also required to get written permission from the Company before he can do so. This suggests that his authority is limited, which places him closer to the realm of employee rather than self employed. All of this suggests that Tom was an employee. There are however, some aspects to be taken into consideration which could support an argument that Tom was not an employee. One of the most important ones of these is the fact that Tom is not entitled to sick pay or membership in the Company’s pension schemes. This leads to an inference that he is not an employee because he is responsible for his own pension and cannot claim wages for sick days. It must be noted however that in a recessionary environment, there are many employers who are hiring employees but providing them a reduced range of benefits, so it is possible that Tom could fall into this category. The period of employment would also be significant in arriving at a decision; hence Tom’s employment has been continuous for a period of two years, which places him more in the category of a regular employee rather than a causal worker or a self employed person whose services are hired as and when necessary. When work is provided on a regular basis, it makes the workers employees rather than casual, self employed workers, as laid out in the case of O’Kelly v Trust House Forte plc. In Ferguson v Dawson Ltd, a building labourer was classified as self employed; yet when he was injured because no guard rail was provided, the Courts held that a breach of duty was owed to the worker under the conditions of the Working Places Regulations 1996. Hence, on the basis of the above, it would appear that Tom can bring a claim of unfair dismissal against Unfit Ltd. The case precedent established in Massey v Crown Life Insurance Co creates a distinction, where there has been an agreed change in the status of the worker. In this particular case, Massey had been employed for two years as a branch manager but later agreed to change his status to a self employed, one man business in order to gain some tax advantages, because the employer did not want the additional administrative burdens arising from tax and insurance deductions. Massey’s change in status was registered by the IRS and when Massey was later sacked and tried to file a claim for unfair dismissal, it was unsuccessful on the basis that his status had changed and he was no longer an employee of the Company. The precedent in this case suggests that because Tom has agreed last month to the suggestion of the Human Resource department to change his status to that of a self employed person, he may no longer be eligible for the benefits arising out of being an employee. The degree of success which Tom can enjoy through his claim would depend largely upon whether or not he can challenge his status of self employed person On the basis of the above arguments, it can therefore be inferred that there are several factors that suggest Tom’s contract may be closer to an employment contract rather than the contract for services which is characteristic of a self employed person. Tom’s status has changed only recently to that of a self employed person and the question to be considered is whether the change occurred for a valid reason and its performance was not illegal. (Corby v Morrison, 1980). In Tom’s case, the change has been made purely for administrative purposes, hence it is not illegal. The case law as stated above appears to suggest that Tom could fall more into the category of an employee rather than a self employed person, because (a) a certain minimum income is guaranteed by the Company (b) his level of control and independence is limited and he needs to seek written permission from the company to delegate responsibilities (c) he is required to wear company uniform and use the company’s support staff. Since the change in status came about for primarily administrative reasons and this has occurred only a month ago, Tom may be able to legitimately file a claim for unfair dismissal from Unfit Ltd. Should be grounds for dismissal be persistent poor performance, Tom would need to be provided the options and avenues of appeal open to him under the unfair dismissal provisions laid out under the Employment Act of 1996. 2. The major issues that arise in this case scenario are (a) what constitutes (b) the unions that may need to be dealt with in arriving at a resolution to the problem and (c) the possibility of a strike breaking out when such a large number of employees are laid off at the same time. One of the first aspects that would need to be taken into consideration is to take into account the redundancy payments that would need to be made to the 400 workers who are being dismissed and to budget for it accordingly. Section 163(2) of the Employment Rights Act of 1996 provides a statutory presumption that when a worker is dismissed, redundancy would be one of the first causes that would be ascribed. In the case of Wilcox v Hastings, only one employee was supposed to have been made redundant but two employees claimed redundancy payments. Hence, at the outset, the Company has to be prepared to rebut the presumption of section 163(2), in order to avoid liability for redundancy payments. One significant factor to take into consideration is the precedent established in Johnson v Nottinghamshire Combined Police Authority, wherein it was held that a change in ours rather than a change in the job duties, did not constitute a redundancy under section 139(1) (b) of the ERA. On this basis, one good option that the Company could consider t arrive at a cost effective solution is to consider shifting more than the required 400 employees, i.e, say 550 employees to part time work, where they will be paid less money due to part time hours but will not be deemed eligible to receive expensive redundancy packages, because they have not been dismissed. The nature of the terms included in the employment contracts can also be taken into consideration in order to determine how cost reductions can be made. For example, this being a multinational company, there are many offices in different locations and some employees can be asked to move into the less financially strapped divisions of the firm to work from there. In O’Brien v Associated Fire Alarms, two electricians worked for a company in Liverpool and were asked to move to another location. They refused and claimed redundancy, which the Courts agreed to because in their case, their employment contract specifically stipulated Liverpool as the location. This was not however, the case in Stevenson v Teeside Bridge an Engineering Ltd, in which a steel erector found himself faced with drying up of work at the site where he always worked. Since his contract contained contractual terms about travelling and expenses, mobility was inherent in the contract; as a result, he was not eligible for redundancy payments. The Company can thus apply this principle, by asking some employees to move to other locations which are more productive, since some sites of the factory do not have adequate amounts of work available. This would also reduce the eligibility of some of those workers to receive redundancy payments and thereby also reduce the amounts which have to be paid. Furthermore, other arrangements could be made would be to introduce a four day work week. One very important aspect that must be taken into consideration is the activity of unions. Section 178(1) of the TULR (C) A (Trade Union and Labor Relations (Consolidation) Act of 1992, a collective agreement is defined as “any agreement or arrangement made by or on behalf of one or more trade unions or one or more employers or employers’ associations and relating to one or more of the matters specified under section 178(2). This indicates that collective agreements have two different facets to them – firstly, the procedural function, or regulating the relationship between the employer or employers’ association and the trade union and secondly, the regulation of provisions for individual employees who are members of the union. For a large multinational company, the existence of trade and employee unions is a factor that must be taken into consideration, because it will influence the extent to which decisions made by the company can be enforced in so far as issues pertaining to redundancy are concerned. There are several court decisions on redundancy issues pertaining to unions. In Young v Canadian Northern Rly Co, a redundancy policy of last in first out was held to be inappropriate in the context of being incorporated into individual contracts. This was in contrast to the precedent in Marley v Forward Trust group (1986), where it was held that a redundancy provision which had been included in individual contracts could be upheld. At common law, the general principle is that there is an implied duty to pay wages but not to provide work when there is any kind of industrial dispute. (Collier v Sunday Referee Publishing Co Ltd (1940). Although the general duty is to pay for work, this does not necessarily apply when the failure to pay wages appears to lie outside the control of the employer. In the case of Browning v Crumlin Valley Collieries, Greer J held that an employer’s duty to pay did not apply when the employer was forced to close down the colliery due to some faults that had developed. This may be especially useful to consider, especially when use in association with other arguments. For example, one argument that may be proffered is that a lay off of workers may be justified when it has become a custom.(Smith and Wood, 2003). This would be a valid argument during the current recessionary environment, when most companies are cutting down or closing up and laying off employees because there is not enough business. In order to forestall the possibility of any costs incurred in legal action, it would however be necessary to ensure that the interests of unions are protected ad necessary procedures followed in dealing with the unions and informing them about planned redundancies. As a preventive measure, it might be advisable to deal with the leaders of the trade unions. While the power that trade unions have has diminished over the years, there is still scope for collective groups of employees to get together and press for demands on pay and protests about being laid off. As a result, working with the unions could make the redundancy process easier, by giving the leaders of the unions adequate notice; this could ensure higher levels of cooperation from the employees and a greater willingness to be accommodating and accept alternative arrangements to redundancy. Thus, in conclusion it must be stated that preparing redundancy packets for 400 employees is likely to be a very expensive businesses because redundancy payments generally provide a fraction of the employee’s salary for a period of several months after the actual employment has ended. The high payments could be mitigated by opting to make 550 employees redundant as opposed to 400, but by changing the working patterns of these employees from full time work to part time work, or working in shifts and thereby reducing the payments. Under these conditions, the employees’ status would shift to that of part time employees rather than full time employees, hence the objective of making lower payments could be achieved, because redundancy payments are likely to be much higher than payment of wages for part time work, with some shifts being only two to three hours. The same objective could also be achieved by moving the employees to other locations where there is more work, which also avoids expensive redundancy payments. Lastly, working with collective groups of employees, through unions, could be a great aid in achieving reductions in payments for the Company. Through the negotiation process, arrangements can be worked out with employees for graduated payments or reduced payments as a part of the redundancy packages that would also correspondingly reduce the payments that need to be made. Bibliography Smith, Ian and Thomas, Gareth, 2007. “Smith and Wood’s employment law”, Oxford University Press. Cases: Browning v Crumlin Valley Collieries(1926) 1KB 522 Corby v Morrison (1980) IRLR 218 Collier v Sunday Referee Publishing Co Ltd (1940) 2 KB 647 Dacas v Brook Street Bureau (2004) IRLR 358 Express Echo Publications v Tanton(1999) IRLR 367 Ferguson v ohn Dawson Ltd (1976) 3 All ER 817 Jennings v Westwood Engineering(1975) IRLR 245 Lee v Chung and Sun Chung Construction and Engineering Co Ltd (1990) ICR 409 Massey v Crown Life Insurance Co (1978) IRC 590 Macfarlane v Glasgow City Council (2001) IRLR 7 Marley v Forward Trust group (1986) IRLR 369 Johnson v Nottinghamshire Combined Police Authority (1974) ICR 170 O’Brien v Associated Fire Alarms Ltd (1968) 1 WLR 1916 O’Kelly v Trust House Forte plc (1984) QB 90 Ready Mixed Concrete (South East) Ltd v MPNI (1968) 1 All ER 433 Stevenson v Teeside Bridge and Engineering Ltd (1971) 1 All ER 296 Stevenson, Jordan and Harrison Ltd v Macdonald and Evans (1952) ITLR 101 Wilcox v Hastings (1987) IRLR 298 Young v Canadian Northern Rly Co (1931) AC 83 Read More